Aiming to Reinvent Itself, Panasonic Moves Beyond the Living Room

FUJISAWA, Japan — Panasonic used to make televisions, refrigerators and computer monitors in this suburb of Tokyo. Now, six years after closing its factories in Fujisawa, the company is building homes on the site, which is sandwiched between Mount Fuji and the Pacific.

With several partners, Panasonic plans to erect 1,000 houses in Fujisawa, using them to showcase its clean-energy technologies. The first batch, sheathed in protective plastic cladding bearing the name of the company’s residential division, PanaHome, is nearing completion.

“After shutting the factories, we thought, What is the latest contribution that we can make to society?” said Hiroyuki Morita, the Fujisawa project leader. “We reached the conclusion that doing something for the environment was very important.”

Like other troubled Japanese electronics giants, Panasonic is trying to get its own house in order. Consumer electronics like those that were once made at Fujisawa provided the foundation for Japan’s postwar economic miracle. But in recent years, South Korea and Silicon Valley have moved to the fore in technological innovation and marketing, while China has taken the lead in manufacturing.

So Panasonic is trying to reinvent itself as a provider of less visible but more profitable industrial technologies. It is focusing on two areas: homes and automobiles, where it supplies battery cells to makers of electric cars, like Tesla Motors.

Panasonic is not the first Japanese electronics giant to back away from the consumer business, but the transformation — if it succeeds — would be particularly striking. Others, like Toshiba, Hitachi and NEC, were just going back to their roots as providers of industrial equipment like power turbines, mining tools or telecommunications gear. Panasonic, founded by Konosuke Matsushita in 1918, started as a maker of consumer lighting fixtures.

Panasonic’s biggest Japanese rival in consumer electronics has long been Sony, which is sticking with smartphones, TVs, cameras and other devices despite tough times. And even Sony has been doing better with some behind-the-scenes products, like sensors for smartphone cameras, than with some of its own branded electronics.

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Houses under construction in Fujisawa that Panasonic helped develop.Credit
Ko Sasaki for The New York Times

In October, as Sony reported a loss for the most recent quarter, Panasonic posted a net profit of 61.5 billion yen, or nearly $590 million, and raised its earnings forecast for the full year.

“We believe Panasonic has turned the corner into sustainable profit expansion in nonconsumer electronics businesses,” Damian Thong, an analyst at Macquarie Securities, wrote in a note to clients.

Panasonic once tried to match Sony move for move. In the heyday of Japan’s dominance in consumer electronics, in the 1970s and ’80s, it was the brand that people chose when they really wanted a Sony Walkman or Trinitron TV but could not quite afford those brands.

In 1990, a year after Sony acquired Columbia Pictures, Panasonic, then known as the Matsushita Electric Industrial Company, bought another American entertainment business, MCA. But Panasonic, which is based in Japan’s down-to-earth second city, Osaka — Sony has its headquarters in the more worldly capital, Tokyo — struggled to make sense of Hollywood. Only five years later, it sold MCA to the Seagram Company.

Since then, the decline in the Japanese electronics industry has claimed several onetime stalwarts, including Sanyo, which was started by a brother-in-law of Mr. Matsushita’s in 1947. Panasonic took over what was left of the company in several stages, from 2008 through 2011.

After it acquired Sanyo, Panasonic accelerated its restructuring, cutting tens of thousands of jobs from the combined group, closing factories and getting out of several unprofitable businesses. The company’s president, Kazuhiro Tsuga, has announced plans to stop making plasma televisions and consumer smartphones and to scale back output of digital cameras. In September, Panasonic said it planned to sell a majority stake in its health care business to Kohlberg Kravis Roberts, the private equity firm. In November, it said it would stop making printed circuit boards, which are used in smartphones and other devices, at four of its plants in 2015.

“Panasonic’s future is being built on far more than a single product category, and its contribution to people’s lives is extending far beyond the living room,” Mr. Tsuga said in a speech at the Consumer Electronics Show in Las Vegas this year. The company declined to make him available for an interview.

From the living room, Panasonic is moving into the garage. In October, it signed a deal to increase its supply of battery cells to Tesla Motors, the American maker of high-performance electric cars, providing two billion lithium-ion cells to the company over four years. Mr. Thong said this would be enough for 83,000 cars a year — about four times Tesla’s estimated production level for this year.

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Panasonic is turning to so-called smart home technologies like those being installed at Fujisawa, including solar power systems.Credit
Ko Sasaki for The New York Times

Panasonic also supplies batteries to other carmakers, including Toyota, Honda, Volkswagen, Ford and PSA Peugeot Citroën, for electric and hybrid vehicles. Now, the company wants to expand its other automotive product lines, including navigation, entertainment, self-driving and parking assistance systems. Panasonic says it intends to double sales in its automotive division to ¥2 trillion over the next five years, becoming one of the top 10 makers of auto parts worldwide.

“Tesla has the best car battery in the world right now,” said Bruce M. Belzowski, an assistant research scientist at the University of Michigan Transportation Research Institute. “Panasonic has got to be getting some halo effect from that.”

Panasonic is predicting comparable growth in businesses related to housing, where it predicts sales of ¥2 trillion in the 2019 fiscal year, up from ¥1.1 trillion in the most recent year. It is focusing on so-called smart home technologies like those being installed at Fujisawa, including solar power systems, LED lighting and sensors for reducing energy consumption.

The company is not giving up entirely on consumer electronics. It plans to continue making LCD televisions, which generally cost less than plasma models with screens of comparable sizes. Although Panasonic is culling its range of low-end digital cameras, which have been hurt by the spread of smartphones, it plans to continue making more expensive models, along with a variety of home appliances.

As a result, some analysts say the overhaul does not go far enough. The improved financial results, they say, are mostly attributable to cost-cutting and to Prime Minister Shinzo Abe’s policy of weakening the yen, rather than new sources of growth. The sharp decline in the currency over the last year has given Panasonic and other Japanese exporters a lift when their foreign sales are converted to yen.

For the first six months of the current financial year, through September, Panasonic reported a 2 percent increase in sales. Adjusted for swings in foreign-exchange rates, however, revenue actually fell 8 percent. Continuing to generate higher profit while sales are flat or falling would require the company to cut further — something it may be loath to do.

Yet other analysts say it makes sense for the company to keep a limited presence in consumer-focused businesses, despite the challenges, because of the visibility attached to them.

“I personally think Panasonic needs this kind of P.R. to maintain its brand,” said Lee Kun Soo, an analyst at IHS iSuppli, a research firm. “The brand is an asset it built up over more than 50 years.”

A version of this article appears in print on December 28, 2013, on page B1 of the New York edition with the headline: Aiming to Reinvent Itself, Panasonic Moves Beyond the Living Room. Order Reprints|Today's Paper|Subscribe